Bear Stearns: Crisis and âRescueâ for a Major Provider of Mortgage-Related Products (CRS Report for Congress)
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| Release Date |
Revised April 9, 2008 |
| Report Number |
RL34420 |
| Report Type |
Report |
| Authors |
Gary Shorter, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
In March 2008, Bear Stearns, the nation's fifth largest investment banking firm,was battered by what its officials described as a sudden liquidity squeeze related toits large exposure to devalued mortgage-backed securities. On March 14, the FederalReserve System announced that it would provide Bear Stearns with an unprecedentedshort-term loan. This was rendered essentially moot when, on March 16, a majorcommercial bank, JP Morgan Chase, agreed to buy Bear Stearns in an exchange ofstock shares for about 1.5% of its share price of a year earlier, a price that translatedto $2/share. To help facilitate the deal, the Federal Reserve agreed to provide specialfinancing in connection with the transaction for up to $30 billion of Bear Stearns'sless liquid assets.
